The essentials of cryptocurrencies

Hi miners! My name is Janika and recently I was introduced to the wonderful world of cryptocurrencies. While exciting, this world may be challenging for a newbie. I will guide you through it and help to learn the ropes as a slightly more experienced newbie.

Let’s get into the basics of cryptocurrencies today.

What are cryptocurrencies?

If we don’t dig too deep, we can say that cryptocurrencies are very similar to any other currencies, such as USD or a different national currency that you use day by day. They are not physical, but digital money. The currencies we are used to, the “real” ones are often referred to as fiat currencies.

Cryptocurrencies serve the same purposes as physical money. You can purchase goods and services or trade them on the exchange. The last option is a bit risky because of their high volatility, so you might want to gain some confidence before trying it.

You can also invest in a cryptocurrency you believe in and wait for its rate to grow. If you are lucky, you can make a small fortune. We’ve all probably heard stories about those computer nerds who were mining Bitcoin on the early stages of its development and became millionaires overnight as its price skyrocketed to over $1000. The price of any coin depends on its supply and demand, if the demand is high, the price will raise.

If you want to convert some coins, you can do it on Changelly, our new cryptocurrency exchange point.

The main difference from fiat currencies and one of the most wonderful things about cryptocurrencies is that they are decentralized. It means that there is no governing authority to control the supply. They are produced by people around the world who use their computers’ CPU and GPU power to solve complex mathematical equations. This process is called mining, that’s what we do here on MinerGate mining pool. The people are called miners, and that’s who we are 🙂

If you want to join he mining community and start mining cryptocurrencies, you can download our application here.

A bit of history

The first cryptocurrency appeared in 2009, it was Bitcoin. Its creator is a person or a group of people who worked under pseudonym Satoshi Nakamoto. Recently, he was nominated for the 2016 Nobel prize in Economy, I am very curious how it will turn out.

The part “crypto” in the word “cryptocurrency” comes from the name of cryptography. It is a very complicated science that lies in the heart of all digital coins. It solves the problems of encrypting information and sending data securely. The goal is to create a system where you can exchange information without any fear of censorship or fraud. As I mentioned, cryptography is very sophisticated, although Bitcoin, for example, is based on relatively simple set of cryptographic constructions. Anyway, there is no need for us to dive into that topic.

Blockchain

One of the core problems any currency can face is counterfeiting. Fiat currencies solve it with some security measures, such as special signs and law enforcement. Cryptocurrencies also have a way to prevent cheating within the system. It is called blockchain.

Blockchain is basically a ledger containing history of all the transactions that have ever taken place. Any data written there will remain forever and it is impossible to make a transaction before it is accepted in the blockchain. Nobody can change the information about previous transactions. If you try to add, remove or change a transaction, it will become instantaneously obvious and easy to catch.

You can find blockchains of different currencies present on MinerGate here.

Finders, keepers and creators

Much like fiat currencies, cryptocurrencies are kept in a wallet, the difference is that you didn’t get it from your mom for Christmas, but installed the program (which it essentially is) on the computer yourself. Again, like with a real wallet, if it is destroyed or lost, your coins are gone forever. Technically, they still exist, but there is no way you can use them ever again.

There is a wide variety of cryptocurrencies, because anybody can create them. Some are designed purely for fun, like Coinye West currency that was shut down by the court in 2014 after the rapper filed a lawsuit.

Crème de la crème

Let’s sum up some of the best features of cryptocurrencies:

they are decentralized, no authority can control the supply

they can be spent on some goods and services just like fiat money

you can mine them without any special equipment, just with your home PC

they are highly secure and resistant to fraud

they can be created to meet different goals

Probably enough information for today, keep posted and discover crypto world with MinerGate!